Gaming companies struggle in tough Q1

May 11,2019

NCSoft and Nexon, two of Korea’s biggest gaming companies, saw slower on-year profits in the year’s first quarter.

At NCSoft, which announced its quarterly earnings Friday, operating profit more than halved on year to 79.5 billion won ($67.5 million). This was a 61 percent cut from the same period last year. Sales plummeted 24 percent on year to 358.8 billion won.

The main reason behind the slowdown was the lack of new releases. In gaming, trends move fast and the success of new games is crucial for companies to keep turning a profit. NCSoft’s last success was Lineage M, the mobile version of a popular multi-player role playing game, which helped the company post a record performance last year.

NCSoft explained that during the first three months it had reduced the number of item promotions on Lineage M ahead of a massive update. This pulled down Lineage sales by 47 percent from the previous quarter.

NCSoft’s next releases are to come during this year’s second half, including the long awaited Lineage2M.

The situation was better for Nexon, which also announced quarterly results Friday afternoon. The industry leader, traded on the Tokyo stock exchange, broke its quarterly revenue record by raising 93.1 billion yen ($847.6 million). Despite the sales record, operating profits slightly slipped 4 percent on year to 52.6 billion yen, or 536.7 billion won.

Steady performances of old PC game titles Dungeon Fighter, MapleStory and Crazyracing Kartrider contributed to the revenue peak. On why the company saw profits fall despite record sales, the spokesman explained it was mainly due to the operating profits of last year’s first quarter having been particularly high at 54.7 billion yen.

Compared to its local peers, Nexon had more new releases this year, including the mobile version of an old PC game titled Crazy Arcade BnB and the PC game Traha, which is one of its biggest releases of the year. But as both games were released after March, their performances are expected to really start appearing on the balance sheet in the second quarter. Netmarble’s earnings report for the year’s first quarter is due to be released on May 14. Analysts anticipate that its sales will rise slightly and operating profit will fall.